Steel is an alloy of iron and carbon (refined coal), made at a smelter. It is the best common metal for smithing most weapons and armor. Steel also has the third highest value of all metals, tied with that of gold.

To smelt steel, you will need ironbars, flux stone, and fuel. Flux is used to remove impurities, including carbon, during the smelting process, while fuel (charcoal or coke) removes oxygen and puts back in a small amount of carbon. The end result is steel: iron with just the right amount of carbon in it. The three ores of iron (hematite, magnetite, and limonite) can only be found in sedimentary layers, with the exception of hematite, which can occasionally be found in igneous extrusive layers. Furthermore, four of the five flux stones (calcite, chalk, dolomite, and limestone) are found only in sedimentary layers, as well as both coal ores (bituminous coal and lignite).

If you have no sedimentary layers at your fortress site, your only hope to make steel is with:

If you embark in a forest biome, you can produce thousands of units of wood from the surface trees alone, without even tapping into the caverns. Charcoal requires more labor per unit than coke, but is often easier to acquire.

Note that bituminous coal and lignite, like most stones, costs only 3☼ at embark or from caravans. With a cunning enough starting build, it is possible to embark with enough coal boulders to produce several hundred units of coke. This is only possible if your parent civilization has access to coal; otherwise, it will not be available at all.

Steel production is fairly complex compared to the creation of other alloys. Important note: in steelmaking, coke or charcoal is also used as an ingredient, apart from its use as fuel. A conventional (non-magma) smelter will require an additional unit of fuel in each reaction.

The overall reaction consumes 2 bars of iron, 2 units of flux, and 2 units of fuel as ingredients (plus an extra 2 fuel at a conventional smelter for heating). This produces 2 bars of steel.

Remember that smelting ironore also requires 1 unit of fuel at a conventional smelter, producing 4 bars of iron, which translates to half a unit of additional fuel used in the recipe above (although you will need a full unit up front.)

To go from raw materials to finished products (assuming 1 bar per crafted item) a ratio of 8 iron bearing ore, 32 flux stone, 9 bituminous coal (or ?? lignite or 72 logs) will have no leftover raw material and will yield 32 single-bar steel items. This is assuming, of course, that your dwarves can time travel and use the last remaining piece of coke to fire the first bituminous coal.